Have you heard the term “Insurance to Value”?
2021 has seen an increase in the costs of construction materials. This has impacted insurance claims significantly.
As per the Associated Builders and Contractors analysis, the latest costs of materials has increased by 73% since 2020! This change has increased the price of a single family home by $36,000.
What Does “Insurance to Value” Mean?
“Insurance to value” means that you have adequate coverage to rebuild your home/property or replace business inventory in the event of a total loss. It means that the amount of insurance purchased by you is adequate to either replace the property or meet any policy conditions, such as co-insurance. And all property insurance forms have a co-insurance unless property is insured to value.
Most home insurance policies provide replacement cost coverage, but only if the insured agrees to cover the home for the entire replacement value. If the insured elects for a lower limit of coverage, the claim is settled on an actual cash value basis = depreciated value.
Your home/property may have been insured to value – up until this pandemic… However, supply chain issues, etc. have caused an increase in material costs. This makes it very important to check that your home/property remains insured to value – and properly!
How Can I Make Sure my Property is Insured to Value?
Adequate insurance to value is important to ensure you are fully indemnified in the event of a claim to your property. Now, more than ever, it is important to take the time to review your insurance policy with your agent. You should understand what requirements the policy contains for insurance to value.
Even if there have been no renovations or upgrades to your property, you still need to update your insurance policy once a year (especially now) in order to keep pace with the increasing costs. If you don’t think it is necessary, it may create problems with filing a claim in the future.
Take the time to contact us or your insurance agent to review your home or property insurance policy. You will be glad you did!